BluefoxToday blog : High housing inventory could further delay expected market turnaround

The residential real estate market is on a turbo-charged roller coaster ride. One day the news is encouraging in the form of increased existing home sales over previous months. Or that housing prices are beginning to stabilize across the country. Pieces like that will get mortgage and housing industry observers and homeowners from Las Vegas to Miami all perked up and dreaming of a brighter tomorrow. And then out of nowhere all that good feeling and improved adrenalin flow is coldly shattered by another report saying that it's not over until it's over. And it may get worse before getting better.

LPS Applied Analytics, a mortgage data service shop, now estimates that it would take nearly nine years, or 103 months, to dispose of every bank foreclosure currently on their books - in other words REOs, real estate owned - and all the property that'll be foreclosed on in the next few years, given the pace of sales of foreclosures over the last several months. A cold-blooded assessment that certainly will make Washington policy makers consider redrawing some of their HAMP and other plans. In March mortgage lenders had roughly 1.1 million foreclosed homes in their inventory, continues LPS Applied Analytics. About 4.8 million additional home loan borrowers were already 60 days or more past due on their payments, a large majority of whom would end up swelling their distressed accounts even more. This so called shadow inventory grew by 30% from the same time last year.

Southern Nevada - home to North Las Vegas, Summerlin, Anthem, Rhodes Ranch, Green Valley, Mountains Edge and Silverstone Ranch - predictably is one of the leaders in this bothersome development. Being underwater is a serious problem in Las Vegas valley, causing many mortgage borrowers to abandon their homes even though many could afford to meet their payment obligations. What's the use when it may take ten or more years to swim dog-paddle back up to the surface? Others simply don't have the money to send in checks due to high unemployment. The severity of the situation in Vegas likely will take longer than close to nine years - LPS' estimate - to sell all the distressed property. It is possible mortgage lenders might speed up the rate of sales down the road, flooding the market with more listings, but that would then hurt price levels and bring them more financial agony.

In essence, LPS analysis points out to a long-term supply-flavored real estate market where prices will remain stagnant, hurting home loan providers' ability to mend their ill-treated books. Their mortgage underwriting criteria is going to stay tight as well while this uncertainty and supply-demand imbalance works its way through the system. Regardless, the housing market does have a pulse. Home buyers, especially first-timers, and real estate investors are deeply in love with rock-bottom housing prices common in many areas, including Las Vegas, and no one can complain about the still affordable mortgage money either.